Taxes

Hypocritical HEROES Act Provision Would Give Rich Americans $75 Billion Tax Windfall

Republicans are the ones usually derided for passing tax cuts that cater to the rich. But with the passage of the HEROES Act by the House of Representatives, it’s time to point a finger at Democrats.

Republicans Provided Windfall To Rich In CARES Act

Back in March, Senate Republicans buried a clause in the CARES Act that will cost taxpayers over $80 billion in 2020 alone. The provision “temporarily suspends a limitation on how much owners of businesses formed as “pass-through” entities can deduct against their non-business income, such as capital gains, to reduce their tax liability,” according to The Washington Post. An analysis by the Joint Commission on Taxation (JCT) showed how the tax provision benefits skew towards the wealthy. “82 percent of the benefits of the policy go to about 43,000 taxpayers who earn more than $1 million annually,” with each of them receiving an average windfall of $1.6 million.

Lloyd Doggett, a Democratic Representative from Texas who had requested the JCT analysis, remarked that “for those earning $1 million annually, a tax break buried in the recent coronavirus relief legislation is so generous that its total cost is more than total new funding for all hospitals in America and more than the total provided to all state and local governments.”


MORE FROM FORBESHow Some Rich Americans Are Getting Stimulus ‘Checks’ Averaging $1.7 Million

Democrats Reciprocate In HEROES Act

Doggett and others lambasted the “millionaire giveaway” and included a provision in the HEROES Act to repeal it. But Democrats simultaneously inserted language into the HEROES Act that provides a different tax windfall for wealthy individuals and isn’t germane to the coronavirus pandemic.

Prior to the 2017 tax cuts, individuals could deduct their state and local property taxes (SALT) in full. This was a popular provision and was the primary reason many taxpayers itemized their deductions. The 2017 Tax Cuts and Jobs Act placed a $10,000 limitation on state and local tax deductions. The limitation is particularly painful for residents in high-tax states – which tend to skew blue – and was, therefore, high on the list of Democratic priorities to repeal. The HEROES Act includes language that would eliminate the limitation on itemized deductions for state and local taxes for the 2020 and 2021 tax years.

While Democrats claim that repealing SALT limitations would be a way for Americans to “have more disposable income,” it’s an inefficient mechanism to distribute money to those in need given its strong skew towards high earners. Despite Henry Connelly, a spokesperson for House Speaker Nancy Pelosi, promising that the SALT repeal would be “tailored to focus on middle-class earners,” the language in the HEROES Act egregiously failed to do so.

According to the non-partisan JCT, a repeal of SALT for 2020 and 2021 tax years could cost over $135 billion. By comparison, the entire first round of stimulus checks that were part of the CARES Act were estimated by the Congressional Budget Office (CBO) to cost $293 billion.

Last year, JCT issued an analysis that showed how a full repeal of the SALT caps would reduce federal tax revenues by over $77 billion in 2019 alone. More eye-opening is to look at the distribution of benefits from a repeal. “Approximately 99 percent of the decrease in tax liability accrues to taxpayers with $100,000 or more of economic income,” the JCT found. Furthermore, over $40 billion, which translates to more than 50 percent of the benefits, would accrue to individuals with income over $1 million; or $67,000 for each millionaire, on average. In other words, the provision amounts to a Democratic millionaire giveaway.

By comparison, the Republican giveaway from the CARES Act will cost $90 billion in 2020 alone and a cumulative $160 billion over 10 years.

SALT Repeal Has Little To Do With Coronavirus Relief

Many of the tax provisions within the HEROES Act are appropriately aimed at providing economic relief from the COVID-19 pandemic, such as the Employee Retention Tax Credit (ERTC) and the Child Tax Credit (CTC). SALT limitation repeal is not one of them. It neither provides an immediate monetary infusion to the 36 million who have filed for unemployment nor does it direct funding to those who are most in financial need. While Democrats have been gunning for this change since 2017, pushing it through under the guise of coronavirus relief is inappropriate and distracts from priorities during a time of tremendous struggle for many Americans. It also rightly opens up Democrats to charges of hypocrisy.

Further Coronavirus-Related Reading:

How Some Rich Americans Are Getting Stimulus ‘Checks’ Averaging $1.7 Million

Repeal The $1.6 Million Stimulus ‘Check’ Loophole For Rich Americans? Futile Proposal Unveiled

Retiring AT&T CEO Gets $274,000 Every Month For Life While Americans Cope Without Second $1,200 Stimulus Check

Proposal: $5,000 Stimulus Check In Exchange For Slightly Delayed Social Security Benefits

Blue State Bailout? Red State Residents Received Largest Stimulus Checks, And Millions In Federal Aid

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